The goalkeeper joined Los Blancos on a season-long loan last September to provide cover for number one Thibaut Courtois, with Keylor Navas having moved in the opposite direction in a permanent deal.
Official Announcement: Areola. #RealMadrid— Real Madrid C.F. 🇬🇧🇺🇸 (@realmadriden) August 11, 2020
Areola made just nine appearances for LaLiga's champions, though, and the Frenchman has been tipped to move on again with game time unlikely at PSG.
"Real Madrid confirmed they have brought Alphonse Areola's loan spell to an end," a team statement read.
"The club would like to thank Areola for his dedication, professionalism and exemplary conduct this season and wishes him the best of luck in this new chapter.
"Real Madrid also thanks PSG for the chance to have had Alphonse Areola as part of our squad."
Reports in the English media said 27-year-old Areola has bought a house in London ahead of a potential move to the Premier League.
Chelsea have been credited with an interest as the Blues appear keen to find a buyer for Kepa Arrizabalaga.
Arsenal were also touted as a potential destination to provide extra cover after Emiliano Martinez deputised when Bernd Leno sustained a knee injury in June, although the Argentinian's brilliant performances mean such a scenario may be unlikely.